Home-grown Blockchain in Brazil

Smallholders in Brazil face the challenges of farming in the 21st century – and cultivate some innovative solutions to deal with them

Based on an article by Allan Foster and Elisa Cardamone, with kind acknowledgements to the FGV-EAESP Center for Sustainability Studies and P22_ON.

 Smallholders: enough on their plate already

Have you ever thought of how the food you consume reaches your table? Although they do not have the acknowledgment they deserve, smallholders play one of the most relevant roles: they feed the country. According to the Brazilian Ministry of Social Development (MDS), family farming accounted for 70% of the food that reached the population tables in 2017. In addition to supplying the domestic market, controlling inflation of food consumed by Brazilians, and employing a significant percentage of labor in the field, smallholders fight hunger and ensure our food security.

In spite of that great relevance, smallholders often find themselves up against obstacles when performing their tasks. Besides facing social problems, they are highly neglected by public and private spheres and, therefore, have difficulty to enter the market, both for the lack of incentives and financial resources, and for bureaucratic issues.

Often, the only way those producers can make their products available to end consumers is through middlemen whose price policies depreciate producers’ labor and remuneration, and at the same time increase the price of final products. This dynamic reinforces unfair relationships between the field and the city, prevents the producers’ development, and hinders, from the consumer’s perspective, access to products at a fair price, taking into consideration all production costs. As such, products on the shelves of large supermarkets are often associated with poor labor conditions and do not reflect fair remuneration to producers.

Eating with ethics comes with a price

At the same time, there is a growing demand in Brazil and in the world for healthier products – both for consumers and producers – that respect labor conditions and the environment. This represents a great market opportunity for those producers, and adds value to production. The path to access those markets, however, relies on getting social and environmental labels, such as organic certification. But this opportunity for smallholders is fraught with difficulties. One way to overcome these is to adopt new certification formats and adhere to technologies such as Blockchain, even though it does not address all the complexity in the universe of family farming. So how did this situation come about?

A Green Revolution – with a sizable footprint

In the 1950s and 60s Brazil underwent what is commonly termed the Green Revolution. This radically changed the way agricultural production was carried out. As such, cultivation practices using massive use of machinery and agrochemicals have become conventional and predominant in the field.

Smallholders found themselves having to adapt to this new production model, since the use of agrochemicals and fertilizers is understood by financial institutions as security for harvest. Consequently, if small-scale producers desire to access credit lines and financing, more often than not they declare that they adopt these practices on their property, even if untrue. Moreover, the widescale use of agrochemicals and fertilizers has, over the years, caused a number of negative effects on the environment and human health. According to Dossiê Abrasco, published by Abrasco (the Brazilian Association of Collective Health) in 2015, intensive and indiscriminate use of agrochemicals led to contamination of soil, water, and even breast milk. This combines with further alarming data – Brazil is the largest world consumer of agrochemicals. Moreover, the country uses agrochemicals that have been banned in other countries, such as those in the European Union. All this has resulted in a growing percentage of the population questioning the traditional model of production.

It comes as no surprise that this has resulted in an increase in the demand for products that, even though inserted in that production model, have less associated environmental and social impact. In 2016, for example, there was a 20% increase in the Brazilian domestic market for organic products. And to guarantee the quality of these foodstuffs, social and environmental certifications have sprouted.

But in spite of addressing the issues of environmentally and socially responsible production, certifications are not so inclusive with smallholders. In order to access the benefits of the certified product market, producers face a wall of bureaucratic procedures in addition to high costs associated with the auditing process. For organic products, for instance, in addition to the costs involved, certification is obtained through surveillance visits and audits conducted by certifying bodies accredited at the Ministry of Agriculture, Cattle Breeding and Food Supply (Mapa) and the Brazilian National Institute of Metrology, Quality and Technology (Inmetro).

In a nutshell, the certification process is not yet entirely inclusive, one of the reasons being that limitations in the structure of small properties are not taken into consideration. Often the requirements are unattainable for family farmers, ignoring the context and the reality of specific production systems such as those used by traditional populations. Even though complying with the standards required by the label, they get stuck in the bureaucratic mud.

Possible alternatives

The most common certification method is through auditing, though this is a costly service. And in order to overcome the obstacles of a traditional certification audit, an alternative found by smallholders is the PGS (Participatory Guarantee System), a mechanism involving solidarity forms of social control that does not rely on the participation of an external institution. It started in Brazil as a result of social pressures and has been officially acknowledged by the Law on Organic Products.

The system works based on a network of producers, aiming at overseeing whether practices adopted by other members of the group comply with organic production regulation. Regularly, they visit one another’s properties and check whether they are compliant. The label they get is collective, meaning that if one producer does not comply with the norm, they will all lose their certification.

Although PGS was successful in overcoming the obstacle posed by high costs of the certification audit system, the bureaucracy required is still significant. In addition to that, the Brazilian system, despite allowing for the use of the organic product label, is not acknowledged in other countries.

Blockchain to smallholder rescue?

Another alternative, surprising as it may be, is Blockchain. Recently created, this technology, which is behind cryptocurrency, is increasingly used in different applications in a number of industries. The main characteristic of this emerging technology is to allow traceability, through a decentralized system, of all transactions made throughout the production process. The new tool may eventually be an alternative to enable the certification process for smallholders, since their foundation resembles the rationale behind the Participatory Guarantee System. Just like PGS, Blockchain is a networked system that fosters transparency and security, and shares information through active participation of system members.

In a nutshell, Blockchain technology is a system based on user collaboration and characterized by a collective experience, since it is embedded in a distributed environment on the Internet. It can thus be understood as a way to automate the PGS process, since both have common principles and bases.

Moreover, Blockchain can be considered a more assertive way of guaranteeing quality than conventional certifications. Essentially, certification audits check what has been done and, by analogy, it takes a snapshot of the current moment – whereas Blockchain can be compared to a movie, since it records the entire process throughout time. But considering smallholders find it difficult to get financing and structure, can Blockchain actually solve that problem? Or will the technological challenge be one additional barrier for the smallholders?

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